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| Los Angeles | San Francisco | San Diego | Washington D.C. Healthcare Financial Management Association - Medi-Cal Update August 11, 2011 Presented by.

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Presentation on theme: "| Los Angeles | San Francisco | San Diego | Washington D.C. Healthcare Financial Management Association - Medi-Cal Update August 11, 2011 Presented by."— Presentation transcript:

1 | Los Angeles | San Francisco | San Diego | Washington D.C. Healthcare Financial Management Association - Medi-Cal Update August 11, 2011 Presented by Lloyd A. Bookman, Esq.

2 Hooper, Lundy & Bookman, PC© Medi-Cal Litigation  Pending Hospital Fee-for-Service Cases  SB 90  CHA Settlement Discussions  Summary of Status of Cuts and Limits since July 1, 2008  The SPA Disapprovals  The Proposed SPA Approval Regulations

3 Hooper, Lundy & Bookman, PC© Mission Hospital — Freeze On Inpatient Rates  About 100 hospitals challenge freeze on Medi-Cal reimbursement for inpatient hospital services not under CMAC contract for state FY  November 2008 — State Court of Appeals decides freeze is invalid  Issues writ prohibiting the application of the freeze  Holds freeze enacted in violation of 13(A) because no public process, rather enacted as part of a budget trailer bill without meaningful public participation

4 Hooper, Lundy & Bookman, PC© Mission Hospital (cont.)  State refuses to pay retroactively  Trial court orders retroactive payments in 2009  State appeals order  On May 25, 2011 court issues unpublished decision reversing trial court order  Court rules original decision did not permit retroactive relief

5 Hooper, Lundy & Bookman, PC© Mission Hospital  Petition for California Supreme Court review pending  Alternative remedies:  Administrative Appeals: Do not dismiss!  Returning to the Superior Court to now seek retroactive relief as a “new” claim

6 Hooper, Lundy & Bookman, PC© DP/NF Rate Case — Exclusion Method And Freeze  In 1996, DHS (now DHCS) changes way median cost per day computed by excluding low Medi-Cal utilization facilities from median computation  CHA successfully challenges under old Boren Amendment for 1996 and 1997 rate years

7 Hooper, Lundy & Bookman, PC© DP/NF Rate Case (cont.)  Boren Amendment repealed in 1997  State continues to apply exclusion methodology  CHA sues for 2001 to 2006 rate years under Section (30)(A)  Also includes challenge to a rate freeze for 2005 rate year under Section (30)(A)

8 Hooper, Lundy & Bookman, PC© DP/NF Rate Case (cont.)  In September, 2010, the Court of Appeal rules that both the exclusion methodology and 2005 freeze are invalid because they were adopted in violation of Section 30(A)  DHCS admitted it did no cost studies to justify exclusion method before any of the years at issue  Legislature did no studies before enacting freeze  California Hospital Association v. Maxwell-Jolly, 188 Cal. App. 4 th 599 (2010)  Remand to trial court for remedy  State petitions U.S. Supreme Court to review, petition pending  Place-holder litigation filed for later years

9 Hooper, Lundy & Bookman, PC© % Rate Cuts (AB 5)  Legislature cuts most Medi-Cal payments by 10% effective July 1, 2008  Affects non-contract inpatient hospital services, DP/NF services, subacute services, hospital outpatient services  Does not affect CMAC contract services or CPE-based services

10 Hooper, Lundy & Bookman, PC© Pending Cases  Independent Living Centers (ILC)  California Medical Association  Santa Rosa Memorial Hospital

11 Hooper, Lundy & Bookman, PC© Independent Living Centers  Currently, the lead case  Preliminary injunction issued in August 2008 preventing application of the cut to pharmacies, physicians, dentists, ADHCs  No preliminary relief for hospitals — court finds no irreparable harm for hospitals or beneficiaries with respect to hospital services

12 Hooper, Lundy & Bookman, PC© Independent Living Centers (cont.)  Two very important Ninth Circuit Decisions  Providers and beneficiaries have a right to sue to enforce 30(A) in federal court under the Supremacy Clause — opens a door that most had thought was shut  Reaffirms Orthopaedic Hospital test

13 Hooper, Lundy & Bookman, PC© Independent Living Centers (cont.)  Injunction issued August 18, 2008  Ninth Circuit rules should be applied retroactively to July 1, 2008  No 11 th amendment bar because state removed case from state to federal court  No state sovereign immunity bar because case started as a state writ of mandate proceeding (important for retroactive relief in other cases)  Supreme Court has granted cert (agreed to hear case)  District Court has stayed all proceedings pending Supreme Court review

14 Hooper, Lundy & Bookman, PC© CMA v. Shewry  CHA, CMA, CAPH, and other associations sue in state court to challenge the 10% reduction — CMA v. Shewry  Superior Court denies Motion for Preliminary Injunction in 2008  Case essentially put on hold pending proceedings in ILC  May be key case if Supreme Court rules against providers in ILC

15 Hooper, Lundy & Bookman, PC© Santa Rosa Memorial Hospital  Specific hospitals challenge 10% cut for non- contract inpatient services in Federal Court in San Francisco  Court issues preliminary injunction on November 18, 2009  Upheld by Ninth Circuit  Finds irreparable harm because no retroactive relief available in federal court, unlike ILC situation  Supreme Court has granted cert

16 Hooper, Lundy & Bookman, PC© AB 1183  Enacted 9/16/2008  Sunset most 10% cuts in AB 5 on March 1, 2009  Replaced with different cuts  DP/NF and hospital subacute — 5%  Hospital outpatient — 1%  Retained 10% cut on noncontract inpatient hospital services

17 Hooper, Lundy & Bookman, PC© AB 1183 (cont.)  Added new limit on noncontract inpatient hospital services  Effective 10/1/08, reimbursement limited to 95% of the regional average CMAC rates of tertiary or non-tertiary hospitals, as applicable  Small and rural hospitals are excepted from the 10% reduction on inpatient reimbursement effective 11/1/2008, and completely excepted from other AB 1183 reductions

18 Hooper, Lundy & Bookman, PC© AB 1183 Litigation  California Pharmacists Association v. Shewry  CHA, CPHA, ADHCs, CMA, CDA and individual providers sue to challenge AB 1183 cuts  Ninth Circuit orders hospital cuts to be preliminarily enjoined effective April 6,  Finds irreparable harm because no federal retroactive relief possible  Supreme Court grants cert  CHA state mandate proceeding pending for retroactive relief

19 Hooper, Lundy & Bookman, PC© AB 5 Limits  Freezes DP/NF and subacute rates rendered beginning August 1, 2009 at levels  Eliminates exemption from 10% reduction for small and rural hospitals effective July 1, 2009

20 Hooper, Lundy & Bookman, PC© CHA v. Maxwell-Jolly  District Court issues preliminary injunction prohibiting the implementation of the freeze and application of 10% reduction to small and rural hospitals effective February 24, 2010  State has appealed. Proceedings are stayed pending Supreme Court disposition of other cases

21 Hooper, Lundy & Bookman, PC© Inpatient Rate Freeze  SB 853 enacted 10/19/2011 includes freeze on inpatient hospital rates  Applies to both contract and non-contract hospitals  Provides that rates for services on or after July 1, 2010 cannot be higher than lower of January 1, 2010 or July 1, 2010 rates  Expressly nullifies Medi-Cal contract provisions to the contrary  DHCS begins implementing around Feb. 2011

22 Hooper, Lundy & Bookman, PC© CHA V. Douglas  Court issues TRO on 1/28/11  Freeze violates Contracts Clause to extent it nullifies existing contract provisions and applies retroactively for non-contract hospitals  Freeze implemented prior to federal approval of SPA or waiver  Court allows DHCS to implement to extent lower rates already programmed with promise that implementation would be reversed if CHA prevails on the preliminary injunction

23 Hooper, Lundy & Bookman, PC© CHA v. Douglas  On March 4, 2011, Court issues preliminary injunction prohibiting implementation of freeze  State appeals — appeal is pending

24 Hooper, Lundy & Bookman, PC© Supreme Court Cases  Three of these cases are pending before the U.S. Supreme Court:  Independent Living Centers  California Pharmacists Association  Santa Rosa Memorial Hospital

25 Hooper, Lundy & Bookman, PC© Supreme Court Cases  Issue is whether providers and beneficiaries may bring a claim under the Supremacy Clause to challenge Medicaid rates on the ground they violate Section 30(A)  The Supreme Court declined to hear whether the Ninth Circuit’s interpretation of Section 30(A) is valid  Hearing scheduled October 3, 2011

26 Hooper, Lundy & Bookman, PC© Supreme Court Cases  If we prevail, cases will move forward to final judgment and high likelihood of favorable outcomes  If state prevails, consider alternative approaches:  State court mandate actions  Legal theories apart from Section 30(A)

27 Hooper, Lundy & Bookman, PC© SB 90  On April 13, 2011 SB 90 passed as urgency legislation  Terminates prospective application of AB 5 10% cut and AB 1183 CMAC – 5% limit on non-contract inpatient services  Eliminates the SB 853 inpatient freeze retrospectively and prospectively

28 Hooper, Lundy & Bookman, PC© CHA Potential Settlement  Applies only to acute inpatient rates  10% cut and CMAC – 5% cut would be eliminated prospectively  No money would change hands for the past  CHA would give up claims for past periods not protected by injunctions  State would give up claims to recover any money protected by injunctions  Inpatient rate freeze eliminated retrospectively and prospectively  No new inpatient rate cuts for

29 Hooper, Lundy & Bookman, PC© Summary  10% reduction for non-contract inpatient hospital services  Santa Rosa plaintiffs: May be applied from July 1, 2008 until November 18, 2009  Small and Rural Hospitals: May be applied July 1, 2008 until November 1, 2008, and from July 1, 2009 until February 24, 2010  Other Hospitals: May be applied from July 1, 2008 until April 13, 2011  Revenue protected by preliminary injunctions is at risk if lose at Supreme Court (absent settlement)  Retro relief possible if prevail at Supreme Court or in state court proceedings (absent settlement)

30 Hooper, Lundy & Bookman, PC© Summary (cont.)  10% reduction for DP/NF, subacute and hospital outpatient services:  Small and Rural Hospitals: May be applied from July 1, 2008 until November 1, 2008  Other Hospitals: May be applied from July 1, 2008 until March 1, 2009  Retroactive relief may be possible if prevail at Supreme Court or in a state mandate proceeding

31 Hooper, Lundy & Bookman, PC© Summary (cont.)  CMAC – 5% limit on non-contract inpatient hospital services  Small and Rural Hospitals: Exempt  Other Hospitals: May be applied from October 1, 2008 until April 6, 2009  Protected revenue (4/6/09 through 4/13/2011) is at risk if lose at Supreme Court (absent settlement)  Retroactive relief may be possible in state court (absent settlement)

32 Hooper, Lundy & Bookman, PC© Summary (cont.)  5% cut to DP/NF and subacute services and 1% cut to hospital outpatient services  Small and Rural Hospitals: Exempt  Other Hospitals: May be applied March 1, 2009 until April 6, 2009  Protected revenue at risk if lose Supreme Court case (April 6, 2009 through May 31, 2011?)  Retroactive relief may be possible in state court

33 Hooper, Lundy & Bookman, PC© Summary (cont.)  Freeze on DP/NF and subacute rates □ May be applied August 1, 2009 until February 24, 2010 □ Protected revenue is at risk if lose Supreme Court case (February 24, 2010 through May 31, 2011?) □ Retroactive relief may be sought

34 Hooper, Lundy & Bookman, PC© Hospital Administrative Appeals  Suggest filing administrative appeals from application of any challenged limits in a cost report final settlement

35 Hooper, Lundy & Bookman, PC© SPA Disapprovals  On November 18, 2010, CMS disapproved the SPAs for AB 5 and AB 1183  State failed to respond to CMS requests for information, including information on impact of cuts on patient access to services  DHCS has filed an administrative appeal

36 Hooper, Lundy & Bookman, PC© SPA Disapprovals (cont.)  DHCS continued to implement after disapproval and has not recalculated reimbursement  DHCS Director in a declaration indicates state will recalculate and refund if disapproval is upheld  CHA and other provider organizations are involved in the DHCS appeal

37 Hooper, Lundy & Bookman, PC© CMS Proposed SPA Approval Regulations  CMS proposes new SPA approval and access regulations on May 6, 2011  Focus is on access

38 Hooper, Lundy & Bookman, PC© Observations  Proposed regulations are a good news/bad news story  Good on access  Pretty good on transparency  Not so good where there is access but rates are very low, like hospital emergency services  Good chance that much of the future activity will be in the CMS approval process

39 Hooper, Lundy & Bookman, PC© Case Cites  Independent Living Ctr. of Southern California v. Shewry 543 F.3d (9th Cir. 2008)  Independent Living Ctr. of Southern California v. Maxwell-Jolly 572 F.3d 644 (9th Cir. 2009)  California Pharmacists Ass'n v. Maxwell-Jolly 563 F.3d 847 (9th Cir. 2009)  California Pharmacists Ass'n v. Maxwell-Jolly 596 F.3d 1098 (9th Cir. 2010)  Mission Reg’l Hosp. Med. Ctr. v. Shewry, 168 Cal. App. 4th 460 (2008).  California Hospital Association v. Maxwell-Jolly, 188 Cal. App. 4 th 599 (2010)

40 Hooper, Lundy & Bookman, PC© State Budget Focus on provisions affecting hospitals

41 Hooper, Lundy & Bookman, PC© Omnibus Health Trailer Bill #1  Enacted in March, 2011

42 Hooper, Lundy & Bookman, PC© Extension of Non-Contract Managed Care Rates  Current state law on Medi-Cal managed care non-contract emergency and post- stabilization services sunsets 1/1/2012  Extended to 1/1/2013

43 Hooper, Lundy & Bookman, PC© Medi-Cal Rate Reductions  Intent of Legislature for DHCS to analyze and identify where rates can be reduced consistent with Section 30(A)  All reductions not to exceed 10% on an aggregate basis for all providers, services, and products

44 Hooper, Lundy & Bookman, PC© Elimination of Old Rate Reductions  Various rate reductions (apart from inpatient hospital services) eliminated for services on and after June 1, 2011  Applies to currently enjoined 5% reduction to DP/NF and subacute services, freeze on DP/NF and subacute rates, and 1% reduction to hospital outpatient services  May be modified by Omnibus 2

45 Hooper, Lundy & Bookman, PC© % Rate Reduction  General 10% reduction to Medi-Cal fee-for- service rates effective June 1, 2011  Does not apply to inpatient hospital, FQHC, or RHC services  Applies to outpatient hospital services  Actuarially equivalent impact on managed care plan rates

46 Hooper, Lundy & Bookman, PC© More Than 10% Reduction  Rates for DP/NF and subacute services are limited to rates in effect during rate year reduced by 10%  Estimate that rates will be reduced by about 23 to 25%  Applies to services beginning June 1, 2011

47 Hooper, Lundy & Bookman, PC© Implementation of Reductions  Reductions implemented only if Director of DHCS determines implementation is consistent with federal law and FFP will be available  Reductions implemented only when federal approval is obtained  Upon federal approval, will be implemented retroactively  DHCS must submit SPA(s) by June 30, 2011 to preserve June 1, 2011 effective date

48 Hooper, Lundy & Bookman, PC© DSH  DSH Replacement payments to private hospitals reduced by:  $30 million in state general funds ($60 million total) for  $75 million in state general funds ($150 million total) for  Can be taken into account in determining UPL room for hospital QA fee supplemental payments

49 Hooper, Lundy & Bookman, PC© New Rate Reductions — CMS Approval process  Provider groups are in contact with CMS concerning the new reductions  CHA focuses on DP/NF and subacute reductions  Critical to demonstrate to CMS that rate cuts will create access problems

50 Hooper, Lundy & Bookman, PC© Mandatory Copayments  Up to $5 per visit at point of service  Up to $3 per prescription for generic drugs at point of service  Up to $5 per prescription for brand drugs at point of service  Up to $50 for emergency room services  Up to $100 per inpatient day, $200 maximum per in patient stay  Up to $5 per dental office visit

51 Hooper, Lundy & Bookman, PC© Mandatory Copayments  DHCS shall set copayments at maximum to extent approved by CMS  Amount of copayments deducted from Medi-Cal payments whether or not collected by the provider  To extend permitted by federal law, provider need not provide services to patient who does not pay the copayment at the point of service  Enhanced copayments effective only to affect FFP is available  Director of DHCS to issue a declaration stating the date the enhanced copayments will be effective

52 Hooper, Lundy & Bookman, PC© Physician Soft Cap  Applies to FFS and Managed Care □ Primary and specialty care in  Hospital outpatient department  Outpatient clinic  Federally qualified health centers (FQHCs)  Rural health centers  Physician offices

53 Hooper, Lundy & Bookman, PC© Physician Soft Cap  Applies after seven visits  Applies to adults only  Exempts pregnant women, children, LTC facility residents  Applies to services by physician or under direction of physician  Excludes specialty mental health services

54 Hooper, Lundy & Bookman, PC© Physician Soft Cap  After seven visits, physician or medical professional under supervision of physician must attest in writing that the visits:  Will prevent deterioration in a beneficiary's condition that would otherwise result in an admission to an emergency department;  Will prevent deterioration in a beneficiary's condition that would otherwise result in inpatient admission;

55 Hooper, Lundy & Bookman, PC© Physician Soft Cap (cont.)  Will prevent disruption in ongoing medical therapy or surgical therapy, or both, including but not limited to medications, radiation, or wound management;  Are necessary for diagnostic workup in progress that would otherwise result in inpatient or emergency department admission; or  Are necessary for the purpose of assessment and form completion for Medi-Cal recipients seeking or receiving in-home supportive services

56 Hooper, Lundy & Bookman, PC© Physician Soft Cap (cont.)  Implementation to occur no sooner than 60 days after the date the DHCS secures all necessary federal approvals

57 Hooper, Lundy & Bookman, PC© Omnibus Health Trailer Bill #2  Requires that, by July 1, 2012, DHCS develop and implement a Medi-Cal payment methodology based on diagnosis-related groups that reflects the costs and staffing levels associated with quality of care for patients in all general acute care hospitals  Moves start date from July 1, 2014

58 Hooper, Lundy & Bookman, PC© Omnibus Health Trailer Bill #2  Dissolves CMAC effective June 30, 2012, all powers, duties, etc. transferred to DHCS  Requires that 1% and 5% Medi-Cal rate reductions implemented in March 2009 cease if and when federal approval is obtained for new 10% reductions rather than June 1, 2011

59 Hooper, Lundy & Bookman, PC© Questions? Any views or opinions expressed in this presentation are solely those of the author(s) and do not necessarily represent those of Hooper, Lundy & Bookman. You should not assume or construe that this presentation represents the opinion of Hooper, Lundy & Bookman. Although this presentation provides information concerning potential legal issues, it is not a substitute for specific legal advice from qualified counsel. You should not and are not authorized to rely on this presentation as a source of legal advice. This presentation is solely for general educational and informational purposes. Your attendance at this presentation does not create any attorney-client relationship between you and Hooper, Lundy & Bookman. You should not act upon this information without seeking your own independent professional advice.


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